April 30, 2011

Fund-raising options other than VC

Economic Times has an article on some of the lesser known funding options available for start-up ventures.
Govt grants and loans
The Small Industries Development Bank of India (SIDBI) has also formed the SIDBI Foundation for Risk Capital to develop and provide appropriate risk capital products for Micro, Small and Medium Enterprises (MSMEs) in different industry segments. Some of the products introduced are equity and equity-like instruments and mezzanine instruments like optionallyconvertible debt and subordinate debt for MSMEs.

With a corpus size of 2,000 crore, the fund will invest a minimum of 25 lakh and a maximum of 10 crore in the form of term loans or assistance. “Our products are easy to work around with. Risk capital has both the characteristic of equity and debt. It’s a very flexible product,” says SIDBI general manager R Dharmaji.

...Credit Guarantee Scheme
It is to bypass the issue of collateral that the government has come up with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Set up by the government of India and SIDBI, this fund gives a guarantee to banks that the fund will make good, up to 85%, the loss incurred by the bank on account of nonrepayment. Loans of up to 1 crore are given under this scheme to SMEs and are collateral-free.

In an accompanying article, Kanwaljit Singh, MD of Helion Ventures, recommends an angel investor round before approaching venture capital firms.
A new class of investors has started emerging — high network individuals, very aptly called Angels; and seed funds who will back you as a start-up if they see the potential. Every city has some of these and it's worth reaching out to them. You could also link up with a lot of wealth managers who manage HNI money as they are also looking to pool their client money and invest behind interesting businesses.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.

Effectual Entrepreneurship

Extracts from a Mint interview with Stuart Read, professor of entrepreneurship at Switzerland's International Institute for Management and Development, and author of Effectual Entrepreneurship:
The first thing they do differently is they start with the stuff they have available. This is called starting with the means rather than the goal. An entrepreneur will, for example, set out saying he knows software and partner with someone who knows graphic design and get into making graphic skins for the iPad. But in talking to the customers, he may discover that a security service is what people really want and he will end up making this.

...The other thing they do differently is how they approach competition. In management, we teach how to look at competition using Porter’s five forces. Do you think the Freitag brothers bothered about competition? They cared more about working with partners, their bicycle messengers who would help them create a market. Looking at partnerships in the early stage is more useful than looking at competition.

...Thirdly, people love talking about the risk-taking entrepreneur. The truth is expert entrepreneurs take on very little risk...Our research shows that expert entrepreneurs look at the worst case, instead—if he’s spending six months and $20,000, he will ask himself if he will be broke and on the streets when it doesn’t work. If the answer is no, he will do it. All of a sudden, the huge uncertainty about whether five million people will buy the iPad application goes away. Expert entrepreneurs make it okay for themselves to fail. They always make investments they can recover.

The next effectual entrepreneurship trait is how they deal with surprise. If you make a plan, what do you do when a surprise comes? The expert entrepreneur uses it to create a new opportunity. The best example is the Post-it, an engineer at 3M trying to make an engineering adhesive.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.

April 16, 2011

"Which floor are you on?" - Article by Alok Kejriwal

Extracted from Alok's blog at http://rodinhood.com. (Emphasis mine)

I consciously notice the floors of the buildings that I visit and try to indentify the people who occupy these floors.

That’s where I see interesting patterns between management styles and the floors of buildings:

The Ground Floor

The people on the ground floor are ‘hands on’.

Mop in the hand, doing the dirty work. Sitting in an office that has no cabins. Talking to the people around them while trying to manage the crowds that come in. Quickly getting hot and tired. Blowing their fuse while trying to be civil. Just wanting to do everything themselves.

The challenge being on the ground floor is that it’s easy to lose perspective. You can’t elevate yourself and peep outside – to get a chance to view what’s new & happening in the big wide world outside or spot encroachments that appear dangerously near you. Your life begins and ends on the ground floor.

All the firms I work with and respect in my personal capacity – my PR & Travel agencies, Tax and Investment Consultants, etc. neatly fall in this category. The more the business leans towards ‘service’, the more it seems rooted on the ground floor. The owners of these ground floor shops are busy running their businesses while personally attending to demanding customers like myself. They rarely get a break to do ‘bigger’ things.

They are martyrs who are happy the way they are.

The 5th Floor

It’s that in-between, hanging, middle floor. Stuck between the ground floor and the top floors. If you operate from the 5th floor, you are involved in day-to-day ops and once in a while manage to get out and lean forward. You can leave your job or work unattended for say a week, before things go crazy.

It takes hard working people a while to reach the 5th floor. So it’s not even easy to abandon.

This also seems to be the ‘inflection’ floor for lots of entrepreneurs. You can get a view of the world outside and can really see where you stand in your current position and where you can reach.

In early 2008, I met an entrepreneur in San Francisco who ran a Photo Sharing website (piczo.com) for teen and tween girls. The business was fully funded by Sierra Venture Partners. Clearly, this Company and the entrepreneur were on the 5th Floor. The CEO could see the Facebook Tsunami hurtling towards him and yet could do very little to escape. He was so patient during our girls’ games discussion while silently acknowledging the death by drowning that awaited him.

My humble advise to those on the 5th floor is to stand on your window ledge and try to climb upwards. Do whatever you can to ascend that building even if it means using your bare hands & feet like Spiderman – with lots of hard work, prayers and hope thrown in. In the end, if you stumble and fall, it will be worth it because it’s better to launch again and aim for the to once again rather than getting stuck on the 5th floor.

The Club Floor (One below the top).

It’s the floor that belongs to those who have arrived. The kind of floor that’s always granted a special status. It’s the floor everyone wants to visit and check out. The occupants have the world at their feet, silently comfortable with the fact that they are living with one more floor above them.

Unfortunately, heights make some people nauseous. You have to have a strong demeanor to enjoy the height – while not falling sick.

I place Jerry Yang and Yahoo! at the Club Level. Both are cult brands and have attained a very lofty status. However the height of success made Yahoo dizzy. It fumbled. The mist surrounding that floor made Jerry Yang miss the big revolution of Search and Social and he along with his Company now remain humbled forever.

Say what you may, Yahoo will always remain an iconic media brand worth billions of dollars. They have their name etched in Gold on the ‘floor plan’ in the building lobby forever.

The Penthouse (with high speed elevators)

Google occupies the Penthouse. So does Facebook. Twitter and Linkedin will join them soon. These Penthouses come with special elevators, which are only meant for the owners of that floor.

The promoters of all these Companies have one amazing similarity – they ride their Penthouse’s high-speed elevators with a vengeance! One moment they are on the ground floor starting up new features and businesses from scratch – the next they are on the 5th floor reviewing what’s happened within the business and then, kaboom – they are back in their Penthouse doing mega deals.

Just look at the way Google monopolized search, bought Youtube, Admob and routinely buys businesses almost every week.

Larry Page, Sergey Brin and Marc Zuckerberg actually own not just the Penthouse but also THE Building. Each and every floor belongs to them and they are comfortable being on whichever floor the situation demands.

The Terrace (with the Helipad)

Rupert Murdoch and Steve Ballmer come to my mind when I think of Terraces with Helipads.

They have the Capital to ‘land’ anywhere, arrive on top of any building as they please and then buy it if they want. ‘Hey – the MySpace building looks interesting; let’s just buy the damn thing. I like this tower called ‘Search’. Let’s just call it Bing.com and party like never before.’

The guys on terraces with helipads fly out when they feel like. One building more or less doesn’t mean anything for them. Observe how MySpace is crumbling and Bing.com is going nowhere. Now look carefully and see that the party is getting wound up as the helicopter’s pilot is whipping up his blades to fly the owners to the terrace of another building.

The Murdochs and Ballmers of the world can never repeat the glory of starting at the Ground Floor and climbing to the Penthouse. They are too spoilt and old.

Finally, given that we have traveled from the Ground Floor to the Terrace, the point to ponder is not to get stuck on the floor that you are on but to make sure you carefully move UP from whichever floor you are on.

April 15, 2011

Persevrance Pays: Profile of Privi Organics

From the Times of India profile of the company which recently raised capital from StanChart Private Equity:
Two years into the business and Privi had not yet created a sufficient client base, pushing it to the verge of shutting down. In 1994, its losses eroded its equity and the company's prime creditor, State Industrial & Investment Corporation Of Maharashtra (SICOM), served a notice to take over.

"We briefly thought of quitting and trying something else," Rao says. "But then we decided to fight it out rather than accept failure." Those days, the big players in aroma chemicals were Bush Boake Allen, Reckitt & Colman of India, Hindustan Lever, Hindustan Polyamides and Fibres, and Tata Oil Mills Company (Tomco).

The partners did their best to turn around the business. They brought down operational costs, switched to synthetic raw materials and negotiated for cost-effective order sizes. The firm also changed its strategy. "Rather than just catering to the incense sticks market, we targeted attar, detergent and soap makers. We rolled out amberfleur (woody notes), sandalwood and dihydromyrcenol (citrus). And our efforts began to pay off," Rao says.

Today, exports contribute 70% to Privi's Rs 370-crore turnover and its clients include Procter & Gamble, Henkel and flavouring and fragrance manufacturers such as Givaudan, Symrise and Firmenich - all based in Europe.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in

April 12, 2011

Press Release: CCCL CEO R Sarbeswar to deliver Entrepreneurship lecture at IIT-Madras

Interactive lecture to feature as part of research firm Venture Intelligence’s “Entrevista” series

Venture Intelligence, India’s leading research service focused on Private Equity/Venture Capital and M&A deal activity, has partnered with IIT Madras’ C-TIDES, to produce multimedia recordings of interactions with successful Indian entrepreneurs from across sectors. Branded as ‘Entrevisa’, the interactions in this series will be available for free and downloadable in audio (mp3 “podcasts”) and streaming video formats from the Entrevista website at http://www.entrevista.in.

As part of the partnership, Venture Intelligence and IIT Madras propose to invite, on a regular basis, successful entrepreneurs from across the country to deliver interactive lectures at the IIT campus. Mr. R Sarabeswar, Chairman & CEO of leading construction services firm, Consolidated Construction Consortium Ltd., will deliver the first such lecture at the Department of Management Studies, IIT Madras on Friday, April 15, 2011 (7.30 pm to 9.00 pm).

“The main objective of Entrevista is to create a single point archive for the best entrepreneurial thought leadership content for the benefit of budding entrepreneurs in India,” said Arun Natarajan, CEO of Venture Intelligence. "At IIT-Madras, we have been observing and encouraging the rising interest in entrepreneurship among our students and faculty in recent years. We are therefore happy to associate with the Entrevista initiative which aims to disseminate a realistic view of entrepreneurship in the Indian context and examine various business models in-depth," remarked Professor Job Kurian, Dean of the Centre for Industrial Consultancy and Sponsored Research (IC&SR) of IIT Madras.

Interested members of the media can register for the April 15 program by contacting Varatharajan at media@ventureintelligence or +91-44-4218-5180.

About CCCL & Mr. R Sarbeswar

Consolidated Construction Consortium Limited (CCCL) is a publicly listed, ISO-certified company with a turnover of around Rs. 18.41 billion. CCCL’s services encompass Construction, Engineering, Procurement, and Project Management. The company has been involved in projects ranging from IT Parks, Biotech Parks, Resorts and Hotels, Commercial, Industrial & Institutional structures and Infrastructure facilities. The company’s various divisions span Mechanical and Electrical Division (M&E), Consolidated Interiors Limited (CIL), Building Products Division, Information Technology Department (Yugasoft), Software Design Division (Yuga Design), Noble Consolidated Glazing Limited (Glazing Solutions). Further, CCCL’s Specialty projects involving Precast Pre-stressed Structures, Pre-engineered structures and Shell Structures are remarkable for their innovative and revolutionary application of technology and expertise. It has offices in Chennai, Bangalore, Hyderabad, Delhi, Kolkata, Pune and Trivandrum. It has also recently opened an office in the Middle East marking the beginning of its international operations.

Mr. R. Sarabeswar is CCCL’s Co-founder, Chairman and Chief Executive Officer. He was a gold medallist and graduated with a bachelor’s degree in Civil Engineering from the Regional Engineering College, Trichy, and holds a Management Degree in strategy from London University. Mr. Sarabeswar has over 30 years of experience in the construction sector and has previously worked for Larsen and Toubro Limited, SPIC and the Shobhakshi Group, Saudi Arabia. In 2007, he was awarded the best alumnus award by the Regional Engineering College Thiruchirapalli.

About Venture Intelligence

Venture Intelligence, a division of TSJ Media Pvt. Ltd., is the leading provider of data and information on Private Equity / Venture Capital and M&A deals in India. Its research and analysis is used extensively by financial and strategic investors, the media as well as government/regulatory agencies. Its customers include leading PE / VC Firms, Limited Partners, Investment Banks, Law Firms, HR Services Firms, Corporations and Consulting Firms. For more information on Venture Intelligence, please visit http://www.ventureintelligence.in.

About IIT-Madras C-TIDES
C-TIDES, the Cell for Technology Innovation, Development and Entrepreneurship Support is responsible for promoting entrepreneurship and related activities in IIT Madras. More information about C-TIDES is available at http://www.c-tides.org.